Ron is a member of the Balance Sheet Affluent club. He recently asked: “Is it a good time now to buy a home. . . a foreclosure?”
Memo to Ron:
I guess it all depends on how you define a “good time.” Some millionaires whom I have interviewed constantly have their eyes open for opportunities in the residential housing market. And not just in the down market like we are experiencing today. What is particularly interesting is that there is a highly significant correlation between one’s net worth and the propensity to search for a “bargain home.” As I stated in The Millionaire Mind,
It seems logical to the man on the street that people who have accumulated less wealth would be more careful, more deliberate when purchasing a home, and those with considerable wealth would not have to be as concerned. If they make a bad home-related decision, it’s not going to bankrupt them. In fact, millionaires are much more deliberate in their home-buying process than nonmillionaires. Even among the ranks of millionaires, however, there is an interesting correlation.
Who is more likely to search for a “bargain” home that was part of a foreclosure, divorce settlement, or estate sale – those with net worths in the $1 million or $2 million group or decamillionaires?
More than one in three (36 per cent) of the decamillionaires indicate “bargain shopping” for a home that was part of a foreclosure, divorce settlement, or estate sale. Fewer than one in five (18 percent) of millionaires in the $1 million ot $2 million net worth category indicates bargain shopping for a home in this way.
Note that these millionaires and decmillionaires were responding to questions about searching for a home that they themselves would own and occupy. . . .
It is trendy today to search for foreclosures. And many people have told me that they are in a state of regret for not buying that bargain foreclosure. Are you looking at foreclosures because you think everybody is? Buying a home is a serious business. It is important to do a thorough analysis in your area as well as an analysis of your real goals and objectives when approaching this issue. Even a [supposedly] heavily discounted foreclosure home still has numerous life cycle costs that are never discounted, i.e. electricity, gas, water, maintenance, etc. And don’t always assume that a foreclosure will appreciate significantly in the future. Buy a home if it fits your family needs and budget. If you wish to venture into the foreclosure market you will need a highly skilled, very productive realtor to guide you through the process.